AGA Head Whistles Past Las Vegas Casinos Graveyard
Frank Fahrenkopf, the president and CEO of the American Gaming Association, told an audience at the Las Vegas Convention Center that smaller casino gambling operations and suppliers were more likely to go under due to current economic conditions than their larger brethren.
Addressing issues that will be discussed during this week's Global Gaming Expo, the head of the organization that represents major land casino interests said the dual problems of financing and declining consumer spending are creating cash and liquidity problems in the industry. But he said the difficulties with operating capital are worse for some. "The big guys have more ability to go out in the marketplace and raise some (capital). Some of the smaller companies do not."
Fahrenkopf's insistence that the gambling giants who make up his membership are better suited to weather a crisis seems to ignore empirical evidence. Smaller casinos in Mississippi, Louisiana, and Pennsylvania are producing higher revenues than last year. Meanwhile, Las Vegas and Atlantic City casinos are seeing double-digit declines in some cases.
Further, the credit crunch has had a more visible effect on the mega-resorts. Las Vegas Sands has fought off rumors of impending bankruptcy, relying on majority owner Sheldon Adelson to loan his company a billion dollars to meet credit covenants. MGM Mirage is facing doubts about its ability to find the necessary financing to complete the expensive CityCenter project.
Mark Dorkin, an economist specializing in casino gambling, says, "The gambling industry is evolving, and the big casinos have not adapted well. The problems for them lie far deeper than just current world conditions.
"Online gambling and local casinos have brought competition to an industry that was largely monopolized by the big Nevada casinos. In order to retain a reasonable market share, Harrah's, MGM, Wynn and the likes will have to offer luxury, elegance, and service as an attraction, rather than as a revenue producer."
Dorkin gave a nod to Online Casino Advisory's Sherman Bradley, noting that the Bradley Theory sums up Fahrenkopf's future predicament far more accurately than Tuesday's speech.
